Relationships among U.S. gambling industries


Adjacent State Seemingly Unrelated Regression Horse Racing Inverse Mill Ratio Casino Gambling 
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  1. 1.
    Levine (2003) describes the gambling debate taking place in many states. In addition to introducing new industries, some state governments have been considering raising tax rates on existing gaming industries (Husband 2003). In an extreme example, the governor of Illinois was reportedly considering a state takeover of all casinos, “to operate them for the state’s profit” (Kelly 2003). Instead, in 2003 the state imposed the country’s highest marginal tax rate on casino revenues, 70%. In 2005 the rate was lowered to 50%.Google Scholar
  2. 3.
    For a detailed discussion, see Eadington (1999) or McGowan (2001).Google Scholar
  3. 5.
    Lotteries have received more research attention than the other gambling industries. However, much of the lottery research has focused on the factors affecting the decision to adopt a lottery, including fiscal pressures. Relevant studies include Alm et al. (1993), Caudill et al. (1995), Mixon, Caudill, Ford, and Peng (1997), Erekson et al. (1999), Glickman and Painter (2004), and Giacopassi, Nichols, and Stitt (2006). Others have more general analyses of lotteries, most notably Clotfelter and Cook (1991) and Borg et al. (1991). For the most part, these studies do not address the relationships between lotteries and other gambling industries.Google Scholar
  4. 6.
    The sources for the industry data follow. Lottery ticket sales come from La-Fleur’s 2001 World Lottery Almanac, 9th edition. TLF Publications, 2001. Casino revenues are from the American Gaming Association and various states’ gaming commissions. Greyhound and horse racing handle are from the 1985–2000 issues of Pari-Mutuel Racing, published by the Association of Racing Commissioners International. The 1985–90 dog and horse racing data and the 1995–2000 horse racing data were reported as handle. For horse and greyhound racing from 1991–94, handle was calculated using the total pari-mutuel takeout and effective takeout rate (handle = total pari-mutuel takeout / effective takeout rate). The same process was used to calculate greyhound racing handle from 1995–2000. Thus all racing data are reported with a consistent measure. All of the above volume data are adjusted for inflation using the CPI from the Bureau of Labor Statistics (1982–84=100). Annual state population estimates are from the Bureau of the Census. The states’ annual Indian casino square footage was calculated using the casino listing at At the time this was written, this source listed 126 Indian-owned casinos in the U.S. Square footage and opening dates were collected from the casinos’ web pages or by phone calls to the casinos.Google Scholar
  5. 7.
    Slot machines and video poker at racetracks, so called “racinos,” are a relatively new phenomenon appearing in some states. Due to their relative newness and the inherent difficulties in classifying these non-racing bets (as racing handle or casino revenue?), this machine gambling is omitted from this analysis. For a discussion of racinos, see Eadington (1999, p. 176) and Thalheimer and Ali (2003, p. 908).Google Scholar
  6. 11.
    For example, see Saba, Beard, Ekelund, and Ressler (1995) and references therein.Google Scholar
  7. 15.
    Annual estimates for these are not available. The years used to derive the estimates vary due to data availability: Baptists (1980 and 1990); degree holders (1990 and 2001); older people (1990 and 2001); and poverty (1992 and 2001). The data come from the Bureau of the Census, with the exception of Baptists, from the New Book of American Rankings.Google Scholar
  8. 19.
    These demand systems are often estimated by SUR. For example, see Wooldridge (2002, 144–145) or Greene (2003, 341 and 362–369).Google Scholar
  9. 21.
    This analysis was first published in Public Finance Review (Walker and Jackson 2007a).Google Scholar
  10. 22.
    See Alm et al. (1993) and Madhusudhan (1996) on using legalized gambling to ease fiscal constraints.Google Scholar
  11. 24.
    See Anderson (2005) for a good summary of tax issues that require additional study.Google Scholar
  12. 25.
    Mason and Stranahan (1996) look more generally at the effects of casinos on state tax revenues, but not particularly at revenues from other forms of gambling.Google Scholar

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© Springer-Verlag Berlin Heidelberg 2007

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